Sign Franchise Review 2022

Sign Franchise Review 2022

By Richard Romano

If nothing else, the pandemic year of 2020 proved that there is power in a union, that being part of a national (or international) network of print and sign businesses—a franchise—helped get many shops through a difficult year. And as the industry (and world) spent 2021 recovering and winding up to have a go at 2022, the sign franchises are in better shape than ever.

Two particular issues dominated this year’s sign franchise review, and you probably don’t need me to tell you what they are: employment (aka “The Great Resignation,” or whatever we want to call it) and problems with getting supplies, such as paper and other consumables for print, aluminum and other materials for signmaking, and so on. That these were also the top two challenges cited by print businesses in general in our "Fall 2021 Print Business Outlook" survey (the results of which appear in our new "Printing Outlook 2022" report, found at https://store.whattheythink.com/downloads/printing-outlook-2022/) indicates the extent to which the print and sign franchises are a useful barometer with which to gauge the condition of the industry in general. It also helps confirm the results of other sources of industry analysis.

We have been talking a lot in recent months about how to attract people to our industry, but if there is one unique aspect of the print and sign franchise business, it’s that it tends to attract entrepreneurs from outside the industry, bringing new ideas unencumbered by the old, traditional “way things are done” as dictated by what Dr. Joe Webb used to call “the Lords of Printing.” That is, "The Great Resignation" had some positive results on the ownership side of the franchise business.

Over the years, I have spoken with many sign franchise owners, and the most common origin story was that they were entrepreneurial individuals by nature who got tired of “working for the man” and left a corporate position to pursue a dream of owning their own business—a sentiment that is, after all, a major contributor to "The Great Resignation."

On the production side of things, however, the franchises are having the same problems with recruitment and retention as other print businesses. Work from home remains a desirable option but is not an option for production staff—no one is going to be taking a CNC router or flatbed printer home to install in their spare bedroom.

As for the supply chain problems, that’s another example of the power of being part of a network. In some cases, the franchise Mother Ship used its muscle to reach out to suppliers and secure needed materials, and in other cases, individual franchises sent supplies back and forth to each other as needed.

Despite these challenges, the sign franchises are bullish on 2022.

Diving In

Because I love playing with data, I always include some general Census Bureau data on the sign industry. The Census Bureau has two different classifications for signs and display graphics:

⦁ NAICS 339950 Sign Manufacturing: This industry comprises establishments primarily engaged in manufacturing signs and related displays of all materials (except printing paper and paperboard signs, notices, displays).

⦁ NAICS 541850 Display/Outdoor Advertising: This industry comprises establishments primarily engaged in creating and designing public display advertising campaign materials, such as printed, painted or electronic displays; and/or placing such displays on indoor or outdoor billboards and panels, or on or within transit vehicles or facilities, shopping malls, retail (in-store) displays and other display structures or sites.

According to the latest County Business Patterns, in 2019 (the most recent year for which the Census Bureau has data), there were 5,865 Sign Manufacturing establishments, an increase of +0.2% from 2018, and 2,462 Display/Outdoor Advertising Establishments, a massive drop of -11%. For most of the 2010s, this category was the closest the Census came to having a “wide-format printing establishment” category, but the declines in this category toward the end of the decade reflect the migration of wide-format capabilities to other, more printing-related categories, as well as consolidation, with “outdoor advertising” largely coming to refer to billboards and the like rather than what we usually think of as signs and display graphics.

In a nutshell, the last year of the "Before Times" marked the end of a strong growth trend in the number of sign manufacturing businesses that started in 2016. (We are not looking forward to the 2020 County Business Patterns data, which may end up being called the "Black Book.") This trend has been reflected in the growth of new centers amongst the franchises, which previous years’ franchise reviews have tracked.

In the 2020 and 2021 franchise reviews, we naturally saw very little growth of new centers (though there were some), and some attrition, which continued through 2021. In 2022, we are starting to see some new growth of centers, but one interesting trend this year was that even if the franchises weren’t dramatically increasing the number of centers, revenues have been way up from last year, perhaps best reflected in a slate of new “highest-revenue” locations.

The Sign Franchises

So, how did the sign franchises fare in 2021?

The franchises included in this year’s review are:

⦁ Alliance Franchise Brands (Image 360, Signs By Tomorrow and Signs Now)

⦁ FASTSIGNS International (part of Propelled Brands)

⦁ Signarama (part of United Franchise Group)

⦁ Speedpro

All told, there were 1,915 centers among the four franchises by the end of 2021, which represents a -0.7% decrease in total centers from last year’s franchise review. Yet, sales were up 12.6% over last year. Indeed, the major trend this year was flat or declining total centers, but increased sales among those centers that remained.

Sign Franchise Summary Data—2021

Let's look at them in turn.

Alliance Franchise Brands (Image360, Signs By Tomorrow, Signs Now)

In 2021, Alliance Franchise Brands saw a -4.3% drop in total number of centers in the sign division, but total system sales increased +12.3%, and the highest revenue shop came in at $3.0 million, up +14.8% from last year’s highest revenue shop. Here we see the first instance of this year’s major trend: little growth—or even a decline—in overall centers, but a large increase in revenues.

According to Ray Palmer, president of Franchise Operations, the decline in centers was due in part to the lingering of pandemic-related effects, with some "Great Resignation" trends thrown in.

“Like in most industries, some of our franchise owners who were approaching retirement decided to bow out a bit earlier than they had originally planned,” said Palmer. “We’ve attracted well-qualified entrepreneurs to take over those long-standing businesses to maintain continuity in those markets while infusing new energy locally and to us as an organization."

The Alliance Franchise Brands sign brands are Image360, Signs By Tomorrow and Signs Now.

“More than 90% of the time that a new owner purchases an existing AFB center, they want to migrate to the Image360 brand if it isn’t already branded as such,” said Palmer. “While all of our brands deliver both traditional signage solutions and innovative, higher-end options to customers, the ‘fast’ connotation of our Signs By Tomorrow and Signs Now brands may incorrectly lead you to think they’d be unable to redo an entire wayfinding system in a hospital, which they can.”

Image360 implies a vast panorama of services, which better represents what Image360 centers are producing.

“If you look at the work that some of our members are doing now, especially in the experiential graphic design area, it’s tremendous,” added Palmer. “They are converting entire environments with graphics and displays, and in some cases, even artwork and statues that they’re commissioning. It’s pretty amazing to see these franchise members embrace the brand and really grow their brand presence to be a visual communications company, not just a sign company.”

As with everyone else in the industry, finding employees has been the major challenge, said Palmer.

“I think it’s starting to ease up. What we’re finding now is flexibility. The mentality of what the workforce wants today, especially from younger potential employees, has changed.”

Palmer said that the key is finding a balance that works for the company and the employee so that the team has the flexibility to work at home. Obviously where this gets tricky is production staff.

In the sign world, this usually means that a “graphic designer” has a dual role in the sign business: design, obviously, but also assisting in physical production. So when a sign shop is looking for a “graphic designer,” that can get challenging.

“Understandably, graphic designers are focused primarily on their design work, so if their role includes assisting with production, it often takes a bit more work to find someone with the right skill set and operational profile for what you need,” said Palmer.

On top of that, salary pressures and inflation are also posing challenges, although they are challenges we are all facing.

“There are a lot of factors but I think the key is being flexible in thinking how the new workplace environment needs to operate,” said Palmer.

Percent Each Job Contributes to Total Revenue—Alliance Franchise Brands (Sign Side)

The 20% “brokered services” are things like traditional signage like electric signs, channel letters, digital signage and things that smaller centers that only have a basic printer–laminator setup need to outsource.

FASTSIGNS International

FASTSIGNS saw a +1.6% increase in the total number of centers in 2021, the only sign franchise that reported an increase in overall centers. Total system sales also increased +17.1% and the highest revenue shop came in at $19 million, up +35.7% from last year’s highest revenue FASTSIGNS shop.

The biggest issues for FASTSIGNS this year, according to CEO Catherine Monson, are the unholy trinity of labor shortages, inflation and supply chain problems. The labor issue is especially vexing.

“We have over 1,300 open positions in the U.S. in the FASTSIGNS system alone,” said Monson. “Some of that is inside sales and some is outside sales, but even more of those are in production and in installation.”

With the average number of employees per establishment in the five to nine range, a staff shortage is a serious problem.

“If you’re a five-person business and you’re down an employee, you’re down 20% in what you can produce,” she said.

And while the usual work-from-home issues are in play (sales yes, production no), even remote graphic design has its problems.

“There’s that collaboration between the client, who kind of knows what they want but isn’t certain exactly certain, and the graphic designer and the salesperson,” said Monson. “When they can talk together and say, ‘Well, I don’t really like how this looks over here, put it over there,’ even though there are some great work-from-home tools, it’s just not the same as that collaboration in person.”

Being part of a network also helps with labor sharing.

“There are times where a franchise has a client who has locations in four states,” said Monson. “The customer likes to deal with one sign company, and our franchisees can call on fellow FASTSIGNS for production of a large job. Whether it’s having multiple centers work on it at the same time or helping with installation in different geographic areas, that power of the network certainly is a real value from a capacity and installation standpoint.”

The supply chain issues illustrate another example of the advantage of being part of a franchise.

“Many of our key vendors have held substrates and vinyl and ink aside for us,” said Monson. “We have great relationships with our vendors, and that has been a benefit to our franchisees.”

Still, that only solves some of the problem.

“There are still times where, whether it’s acrylic, .05 aluminum, or a particular kind of canvas, you just can’t find it for a while. And we certainly, from a corporate standpoint, spent a huge amount of time finding incremental sources of supply; where we might have had five key vendors for certain substrates, we’re now at 15, as we continue to look for more and more ways to help keep our franchisees’ pipelines full of the materials that they need to produce successfully.”

Franchisees also help spot other franchisees with certain kinds of materials like inks and vinyl. And the franchise as a whole—being as large as it is—can negotiate better deals on pricing of consumables, substrates and even equipment. Through the combination of increasing sales and cutting costs, FASTSIGNS franchisees have been able to drive up profitability, which is a strong focus for the franchise.

“Our top key strategic objective is to further increase franchisees’ profits,” said Monson.

Last year, we noted that some of the franchises were looking at acquiring other types of print businesses to complement their sign and display business, but FASTSIGNS is pursuing a tuck-in strategy, or franchisees buying books of business from other struggling independent sign businesses. This involves buying the customer list, artwork, and perhaps select employees and equipment of failing independent businesses.

“So that’s a real focus for us, and we have a lot of those in process right now,” said Monson. “We think that franchisees will be buying even more books of business this year.”

The work-from-home boom helped out FASTSIGNS franchisees in another way: interior décor.

“We had a good boon during the work-from-home phase where someone wanted to have something that made their bedroom look like an office,” said Monson.

It was certainly a vast improvement over those horrible, head-devouring Zoom backgrounds.

2022 started strong for FASTSIGNS, with five FASTSIGNS franchises sold in the first two months, and profitability up across the network.

“We continue to have the highest franchisee satisfaction in signage franchising and really very high throughout all of franchising. Our franchisees are happy, they’re making money, and they’re well supported by the business. It’s a great time to be a FASTSIGNS franchisee,” said Monson.

Percent Each Job Contributes to Total Revenue—FASTSIGNS

Signarama

Signarama saw a -1.0% decrease in the total number of centers in 2021, although total system sales increased +3.9% while the highest revenue shop came in at $6.1 million, up -27.5 % from last year’s highest revenue Signarama center. Signarama was another case of seeing center growth flat or declining, but overall revenues up.

“We been pretty flat in terms of growth of overall centers, but our franchisees have actually grown quite rapidly,” said A.J. Titus, president of Signarama. “We’ve had really great growth in terms of our franchisees selling signs, adding to their space, buying buildings, buying equipment—all of that fun stuff. We would like to grow more from the franchise sales point-of-view and the overall units, and I think that’s coming this year. But overall, it’s been a great year for Signarama.”

Indeed, the franchise now has multiple $4 million centers, where previously they had only had one or two.

“Our franchise owners’ revenues have gone up and in turn our royalties go up from that, so overall from signs sold the revenues are up and our internal revenue from the corporate office has grown,” said Titus.

Titus attributes this revenue growth to rebounding and recovering from the pandemic as businesses opened up and people started getting out and about more—as well as another effect of "The Great Resignation."

“I think more and more people are starting to start a business or look at the opportunity to start a new business, so that’s definitely contributing to it, as well,” said Titus.

Whereas other franchises have been looking at opportunities in other kinds of printing, Signarama is staying focused on signs, and is looking at new technologies and new products—but keeping them firmly grounded in signage.

“Everything touches signs because we’re a sign company, so we do want to stay with that,” said Titus. “But a lot of the stuff we’re looking at right now, and some owners are, is digital signage—LED message centers, digital signage and then the content for that. There’s a revenue model in terms of helping business owners create the content for their digital message centers.”

So getting into small-format commercial print is pretty "meh" for Signarama.

“A lot of our stores will dabble in things like that, but it’s definitely not something that I’m focused on,” said Titus. “We’re very focused on being the best sign company, and there are so many different products in that.”

Signarama is very much a family business. Titus is President, his father is CEO, and he recently hired his brother, Andrew, to be in charge of sales.

“I think he’s going to do a great job,” said Titus.

Another strategy is to revamp Signarama’s marketing efforts and take advantage of "The Great Resignation" to recruit more new center owners.

“I think people want to control their own destiny, and I think franchising is going to reap the benefit of that,” he said.

But like everyone, Signarama has felt the dark side of "The Great Resignation," as well, and the challenges of retaining employees.

“The expectation of salary has changed, and employees are asking for things that they weren’t asking for before, like flex schedules,” said Titus. “It’s hard to have a flex schedule with a sign company when you’re physically making signs, but I think we’ve done a good job.”

He remains philosophical about the current challenges.

“I tell franchise owners all the time that we’re always going to be dealing with pricing, and we’re always going to be dealing with staff and being creative and educating our staffs on the value-add and the good things about the sign industry.”

The strategy going forward is to adapt to whatever forces they need to adapt to, but not let it fundamentally change Signarama.

“We’re going to keep being the company that we’ve been for 35 years. We’re going to focus on our relationships with our franchise owners, and we’re going to look to grow internationally and domestically," said Titus. “But we’re also looking at this with a mindset of what the ‘new normal’ is, isn’t exactly what it was before.

“Although we’re going to still be a face-to-face company and still shake hands and network and care about our community, there might be different ways that we need to do that moving forward,” he added.

And that also means not leaving older franchise owners in the dust.

“How do we help our franchise owners, some of whom are in their late 50s, 60s and 70s and in some cases are not very comfortable with technology?” he said. “How do we help them and train them, or how do we help them position the business to sell and move on?”

Percent Each Job Contributes to Total Revenue—Signarama

SpeedPro

SpeedPro saw a -3.0% decrease in the total number of centers in 2021, but total system sales increased +21.1%—again, keeping with this year’s trend of seeing center growth flat or declining, but overall revenues up.

In 2020, SpeedPro saw some studio owners retire, and in the year since then there were unfortunately a few deaths as well. But thanks to the recovery from the pandemic, the studios that remained, boosted overall revenues.

You can probably guess what the top challenges are: labor and supply chain, “but supply chain is probably the biggest, with the longest impact,” said Larry Oberly, CEO and chairman of SpeedPro.

SpeedPro studios have also boosted business by increasing the kinds of projects they can take on.

“We’ve really dramatically grown our flatbed cutters; in six years, we’ve grown the number by almost 600%,” said Oberly. “We’re adding a lot of capabilities, so we’re really able to upscale considerably the types of projects we are doing. We’re also placing a bigger focus on national accounts with those increased capabilities. So that’s an area where we really see a great opportunity for us.”

SpeedPro has also been looking at expanding further capabilities in in-house fabric printing as well as labels and packaging. SpeedPro will also announce a new program surrounding digital signage.

SpeedPro is also rolling out a new e-commerce platform for its studios, to ease the ordering process.

“It’s going to be all opt-in for our studios on an individual studio basis,” said Oberly. “We already have some on it, but we’re going to grow that this year.”

Percent Each Job Contributes to Total Revenue—SpeedPro

At the End of the Day

In our "Fall 2021 Print Outlook" survey, we asked print business professionals if they saw “becoming part of a franchise” as a business opportunity, and no one did. Obviously, it’s not for everyone; but the last two years have shown us that in times of trouble, being part of a network can be a positive boon, if not a way of simply surviving. Still, as the declines in centers among the franchises demonstrate, it’s not a total guarantee. But for entrepreneurial businesspeople, a franchise can be a great opportunity to run one’s own business—and have someone get your back. It can be the best of both worlds.